There was much in Rachel Reeves’ Budget last week for Liberal Democrats to criticise. The freezing of the income tax bands is a stealth tax. It will gradually push many people over time into higher tax bands, something that will especially hurt low income earners. The new tax on electric vehicles is a retrograde step when we are facing a climate crisis and we need more car owners to go green. In addition, Labour failed to implement a windfall tax on the big banks, something that we have been calling for.
However, it was not all bad news for Liberal Democrats. There were three clear policy wins for us in the Budget on three policies that we have long been campaigning for. Firstly, the socially unjust and immoral two-child benefit cap is due to be scrapped. Secondly, Labour is increasing taxes on the online gambling companies. Lastly, the Government is introducing a mansion tax on properties worth more than £2 million. What it refers to as a “High Value Council Tax Surcharge”.
So, there were at least three things for Liberal Democrats to be happy with in regard to the Budget, or so I thought. It has since transpired that unbeknownst to party members and without the approval of a vote at Federal Conference, the party has U-turned on its support for a mansion tax. In post-Budget interviews, Ed Davey revealed that he, and by extension the public face of the party, did not support Labour’s mansion tax. This is despite the fact that it has been part of the party’s policy platform for over 16 years.
The idea of a mansion tax originates with Vince Cable, who first called for a mansion tax way back in 2009. His initial proposal was to introduce a mansion tax on properties worth more than £1 million. However, by the 2010 general election the policy was amended so that it would now be levied at a rate of 1% on the value of a property above £2 million (2010 Liberal Democrat Manifesto, Page 14). By 2015, the mansion tax had been refined with a banded structure (similar to Council Tax) and was now referred to as a “High Value Property Levy” on properties worth over £2 million (2015 Liberal Democrat Manifesto, Page 42). Labour now plans to implement an almost identical policy. Vince Cable continues to support a mansion tax, voicing support for it in an article published on Lib Dem Voice only last week.
A mansion tax still continues to be extremely popular amongst Liberal Democrat voters. Last week, YouGov produced a series of polls in response to the Budget announcements. When asked whether they thought a “new annual tax on houses worth over £2 million” was the right thing to do, 81% of the Liberal Democrat voters surveyed thought that it was right, with only 12% disagreeing.
The mansion tax will impact less than the top 0.7% of households. At a time when Britain’s public services are stretched to breaking point and taxes will inevitably have to increase, it is only right that we asked the wealthiest property owners to contribute more. Asking the wealthiest to pay more to lift children out of poverty or to invest more in the NHS and social care is the fair thing to do. In fact, it is the Liberal Democrat thing to do, or at least it was up until a few days ago.
What is especially jarring is that we are wilfully ceding credit for one of our most notable progressive tax policies to our opponents in the Labour Party. In addition, abandoning such a policy when we are currently neck-and-neck with the Green Party in the opinion polls seems especially foolhardy. Pursuing a soft Tory policy strategy undermines our reputation as a progressive party and risks us losing vital progressive voters. What sustains many of our 72 MPs in their constituencies is a broad anti-Tory/anti-Reform coalition of voters that ranges from former Tory voters to committed progressives, who would otherwise vote Labour or Green.
In the run-up to last year’s general election, the views of 2024 Lib Dem voters were almost identical to those of 2024 Labour voters. The only difference was that Lib Dem voters tended to be just slightly to the right of Labour voters. The average 2024 Lib Dem voter was a moderate progressive, not a moderate Tory. It is important therefore that the party leadership recognises the immense electoral dangers of imitating Tory rhetoric and policy preferences. We may end up losing many of our progressive voters, while gaining precious few soft Tory voters in return.
A group of Liberal Democrat activists in the Radical Association have put together an open letter criticising the U-turn on the mansion tax. I encourage all Liberal Democrats to sign it. To echo a line in the E-mail the Radical Association sent to its supporters, “We are Liberal Democrats, not Liberal Conservatives”. Ed Davey and the party leadership need to remember this and U-turn on their mansion tax U-turn as soon as possible.
* Paul Hindley is a Liberal Democrat activist and a supporter of the Radical Association from Blackpool. He is the co-editor of When We Speak of Freedom: Radical Liberalism in an Age of Crisis, which was published earlier this year.
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14 Comments
Do we think it is ‘moral’ to freeze personal allowances for people working full time on minimum wage, forcing them to pay more income tax, so that more benefits can be paid to families who are not working and may already receive more in benefits than they take home?
It is surely a ‘moral’ principle that people should always be better off working for a living than living on welfare. It is concerning that this is not currently the case. (See publications by the Centre for Social Justice for detailed evidence.)
This is worth a read: https://www.theguardian.com/commentisfree/2025/nov/30/labour-squeezed-middle-class-budget-families-voters
“We are Liberal Democrats, not Liberal Conservatives”
There’s a range of opinion from supporters expressed on LDV. Some is quite socialist. Some other can be described as Liberal Conservative and some even not so Liberal. The range of opinion is narrower for Lib Dem MPs but some fairly can be described as Liberal Conservative.
I think it would have been good to equalise tax rates on capital gains, dividends and rental income with income tax, add 2p to income tax rates and take 2p off employee NI.
As to whether it’s moral to pay benefits to families who are not working – if you’re talking about the 2 child cap removal, this is paid to families whether or not they are working. Should we have child benefit at all? An interesting question when the UK fertility rate is around 1.4 – 2/3 of the population replacement rate, and implying a steady aging and shrinking of the population.
On the mileage charge for EVs – I think it should apply to all cars, hybrid, ICE, or EV. ICE cars have not had to pay fuel duty increases for many years now. They all use the roads. Maybe it should vary by area of the car and weight.
Just because we are in favour of a Mansion Tax, doesn’t mean that we have to be in favour of the version of the Mansion Tax that Labour are proposing: a charge of £2,500 for properties valued between £2 million and £2,499,999; a charge of £3,500 on properties valued between £2.5 million and £3,499,999; a charge of £5,000 on properties valued between £3.5 million and £4,999,999 and £7,500 on properties valued at £5 million or more. This slab structure creates perverse incentives to agree a price below one of these thresholds. It doesn’t take much imagination to see some people selling off their gardens and then renting them back to avoid the tax; retailers do this already with their shops. We should be in favour of good taxes not bad taxes and in the form that Labour are proposing it this is a bad tax and has already been criticised on these grounds by the OBR.
Unless you can deduct from a capital gain the cost in today’s pound and spread the gain over the life of the asset and as many indivuals involved it would be unfair. It would also be bad for investment. A capital gain, in nature is different from income.By all means increase (or decrease) the tax but taxing a capital gain as income makes no sense whatsoever.
@Jenny Barnes “as to whether it’s moral to pay benefits to families who are not working – if you’re talking about the 2 child cap removal, this is paid to families whether or not they are working. Should we have child benefit at all? ”
As I understand it, The “two-child cap” refers to Universal Credit not increasing for a third and subsequent child, and although it is paid to both working and non-working parents, and is means-tested; it does not refer to Child Benefit, which is not means-tested (until the “cliff-edge” cut off when one parent moves into the higher rate of tax) and isn’t subject to the cap. As removing the two-child cap is expected to lift 350,000 children out of poverty that seems a decent and moral use of tax money to me.
We should always be cautious about defining our policy stances in relation to other parties but Paul Hindley is right to call for integrity in recognising overlapping positions. Meanwhile Tristan Ward usefully flags up John Harris’s “squeezed middle” article. Harris gets out of London and around the country more than many political journalists and is always good at alerting us to common elements in the changing experiences of people in different regions.
“Meanwhile Tristan Ward usefully flags up John Harris’s “squeezed middle” article. ”
Thank you Geoff. I suspect the “squeezed middle” is where the next election will be won and lost.
Will they recover their faith in the Tories? Will Labour deliver against the cost of living crisis in time? Will they give liberal democracy one more try with the genuine article (us)?
Or will they throw their toys out of the pram with the populists of left and/or right?
I expect much depends on” on the ground campaigning” in each constituency, together with how much Farage’s links to Brexit , Russia and the US damage him, along with Reform’s “interesting” developing record in local government.
I agree with the above article. I think the public are more open to the idea of a mansion tax now than when the policy was suggested before. Pressure for the taxation of wealth is building a head of steam because of the work of Tax Justice charities and the Green Party and campaigners like Gary Stevenson.
Thanks for this article, Paul, and for recalling our party’s history in support of a ‘Mansion Tax’, which I was aware was party policy without having been able to say when it became so. I have signed the letter to Ed Davey and asked to be kept in touch with the Radical Association. I am also glad that you are here reminding everyone that party policy is made by our Conferences, and our MPs, even if in the leadership, should not contradict agreed policies or announce any new policies without Conference approving them.
I hadn’t picked up that Ed had spoken against Labour’s proposal on Mansion Tax. I can understand it if he said there was a better model for doing it, but not against the principle.
I use the words “he” because he is not speaking on behalf of Lib Dems, but what he and I presume advisors say.
Not only am I annoyed at the announcement, but why it is being made. An attempt to woo voters at the next election in the London and SE area, with no regard to the impact of lack of money needed for essential services for the rest of us.
I’ll find the letter to sign.
Of course most people are in favour of a tax they don’t have to pay. I don’t think there is anything unexpected or moral about that. Regardless of how many people it affects, as liberals dont we consider individuals not classes surely the principal should be us it necessary and is it based on the ability to pay ? Given the relatively small amount of revenue this will raise, £400m ?, it is really just gesture to appease the soak thecrich brigade.
His was a bad policy before and it is now. It doesn’t matter how popular it is.
The correct policy was a LVT, but people jump to these superficially attractive policies that are distortionary and will be another drag on the economy. We have ignored the endless complexity added through taxes since ’97 and just nodding to each one is not a way to improve the situation.